Seoul (Platts)--27Jun2012/348 am EDT/748 GMT

Iran's top envoy in Seoul warned Wednesday his country may halt imports of all South Korean goods to protest South Korea's decision to suspend Iranian crude oil imports over EU sanctions.

Iran "may decide to fully stop importing [South] Korean goods" if Seoul imposes the ban, Ambassador Ahmad Masumifar told Seoul's Yonhap News Agency.

Iran is South Korea's third-largest market in the Middle East, worth $6.1 billion in 2011, up from $4.6 billion in 2010.

The warning comes a day after Seoul announced it had no option but to halt Iranian crude oil imports from July 1 due to EU sanctions banning insurance cover for tankers carrying Iranian crude.

"South Korea has to suspend oil imports from Iran as the EU is set to stop offering any type of insurance on Iranian oil shipments while also suspending oil imports from Iran itself from July 1," the Ministry of Knowledge Economy, which is responsible for energy, industry and commerce, said in a statement.

The suspension of crude imports effectively reduces Seoul's exports to Iran due to the risk of default on payments. South Korean exporters have been indirectly paid through the Iranian central bank's won-denominated accounts in Seoul, into which South Korean refiners pay for Iranian crude to avoid US financial sanctions over Iran's nuclear program.

However, once refiners suspend Iranian oil imports due to EU insurance sanctions from July 1 and no longer put money into the accounts, Iran would have no means of paying for imports from South Korea.

South Korea's buyers of Iranian oil, refiners SK Innovation and Hyundai Oilbank, say they have already virtually suspended shipments from Iran.

--Charles Lee, newsdesk@platts.com

--Edited by Wendy Wells, wendy_wells@platts.com

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